Debunking Health Care Flexible Spending Account Myths And

According to an analysis from the Employee Benefits Research Institute, there are currently (2025) 3.2 million active health care flexible spending account (HCFSAs) in the US. A study from Benepass found that 86 percent of US employers offer HCFSAs, suggesting a large potential employee base for enrollment.

Permanent federal employees – full-term and part-time – are eligible to enroll in a HCFSA offered through the “FedFlex” program. Information about the program can be obtained at https://www.fsafeds.gov. Unfortunately, there is only a small percentage of federal employees participating in the FedFlex program HCFSA. This is true in spite of the fact that an employee is not required to be enrolled in the Federal Employees Health Benefits (FEHB) program in order to participate in the HCFSA. An employee can be enrolled in a non-federal HCFSA that the spouse is enrolled in. Or the federal employee can be a Uniformed Services retiree and enrolled in TriCare. The key requirement to enroll in the FSAFEDS HCFSA is that a federal employee be eligible to enroll in the FEHB program, but does not have to be enrolled.

The purpose of enrolling in an HCFSA is to help an employee pay any medical, dental and vision expenses incurred by the employee and eligible family members (spouses and dependents) in a tax-preferential manner. The HCFSA is funded using deductions from an employee before taxed salary. The before-taxed dollars are set aside before all taxes, including federal and state income taxes, and Social Security (FICA) and Medicare Part A (Hospital Insurance Tax) payroll taxes are deducted.

HCFSA owners can request tax-free withdrawals to pay health, dental and vision insurance plan deductibles, co-insurance, co-payments and most expenses that insurance will not cover or pay. No health, dental and vision insurance plan pays for every expense at 100 percent coverage. The question then becomes what is the best way to pay for these out-of-pocket expenses with after-taxed dollars or before-taxed dollars. Most employees would agree that using before-taxed dollars is the preferred way. That is why every federal employee should consider enrolling in the HCFSA.

FSAFEDS conducts an “open season” enrollment every year from the second Monday of November through the second Monday of December. Between November 10, 2025 and December 8, 2025, federal employees can enroll in the HCFSA for plan year 2026 which starts January 1, 2026. If an employee is enrolled in an HCFSA during 2025, the employee has to reenroll for 2026. HCFSA enrollment does not rollover automatically from one plan year to the next. A minimum of $100 and a maximum of $3,400 can be set aside to an HCFSA for plan year 2026.

It is a perfect time during this HCFSA “open season” to educate federal employees about HCFSAs and to debunk some common HCFSA myths that could not result in some not enrolling in an HCFSA for plan year 2026. By educating federal employees about FSA rules and disposing of three HCFSA myths, it is hoped that more employees will enroll and get the most of their tax-free healthcare dollars.